DHARMARATNAKARA RAI BAHADUR V. BHASKAR RAJU AND BROTHERS
BENCH: HON'BLE JUSTICE B.R. GAVAI, SURYA KANT
SLP(c) NO.7088 OF 2015
APPELLANT- DHARMARATNAKARA RAI BAHADUR
RESPONDENT- BHASKAR RAJU
1) The appellant no.1 was a registered charitable trust and the rest of the appellants were trustees. Appellant no.1 desired to develop the land owned by it and construct a multipurpose hall with an office. Respondent no.1 offered to develop it and also to renovate the Samadhi of the founder of the trust. As a result, a lease dead was made for a time period of 38 years. As per the deed the lessee (respondent no.1) was required to pay a sum of Rs 55lakhs at no interest and it was to be refunded at the end of 38 years if the deed was not extended.
2) A subsequent lease deed was also executed in the following year. As per the agreement in the lease deed, the Respondents had to pay money as an interest-free deposit, which they failed to do. This resulted in disputes followed by the filing of Civil Suit( O.S no8952 OF 2010) being filed by the Appellant.
3) During the continuance of this Suit, the Respondents invoked the arbitration clause under the lease deed (pre-2015 Amendment). A petition under section-11(6) was filed before the High Court of Karnataka. The Appellants sought dismissal of the Section- 11 Petition on the ground that the lease deed was insufficiently stamped and it should be mandatorily impounded.
APPELLANTS SUBMISSION- Shri Nikhil Nayyar, learned senior counsel submits that though a clause in the deed dated 12.3.1997 provides for arbitration between the parties but the lease deed was insufficiently stamped. Also, the respondents have invoked the arbitration clause after 16 years of the suit filed by the appellant.
RESPONDENTS SUBMISSION- Shri Balaji Srinivasan, learned counsel of the respondents, on the contrast submits that the agreement had no fault and was in effect. Also, it was required to be stamped only after all the tenants were evicted.
Whether the arbitration clause added in the lease deed and which was not duly stamped, can be acted upon by the parties or not?
HIGH COURT JUDGEMENT-
The High Court sent the matter to Registrar (Judicial) for the determination of the issue. The Registrar stated that the document was of lease deed and not an agreement to lease and therefore, directed the Respondents to pay deficit stamp duty.
The High Court did not consider the Registrar’s report. High court appointed the arbitrator Justice L. Srinivasa Reddy former judge of the high court of Karnataka at Bangalore allowing the petition under section-11.
The High Court order was challenged in the Supreme Court by appellant no.1.
SUPREME COURT JUDGEMENT-
The Court gave its decision based on Division Bench judgment in SMS Tea Estates Private Limited v. Chandmari Tea Company Private Limited (2011) 14 SCC 66, wherein the provisions were in pari materia with the provisions of the Karnataka Stamp Act, 1957.
Observing, SMS Tea Estate held that having regard to the proviso of Section 49 of the Registration Act read with Section 16(1)(a) of the Arbitration Act, an arbitration agreement in a compulsorily registrable document (but not registered) can be acted upon and enforced for the purpose of arbitration as arbitration agreement does not require registration. However, it held that having regard to Section 35 of the Stamp Act, 1899 unless the stamp duty and penalty are paid, the Court cannot act upon it. If the Court concludes that it is not properly stamped, it should be impounded under Section 38 of the Stamp Act.
By all the above observations, the Supreme Court held that the High Court erred in relying on the arbitration clause as the lease deed was not sufficiently stamped. The High Court order was set aside.